<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
INTERNATIONAL BUSINESS MACHINES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
DEF 14A
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[IBM LOGO]
Dear Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders on
Tuesday, April 29, at 10 a.m., in the Dallas Convention Center, Dallas, Texas.
At this year's Annual Meeting you will be asked to approve, among other things,
certain amendments to IBM's Certificate of Incorporation to increase the number
of authorized shares. Your approval of these amendments is necessary to
effectuate a two-for-one stock split declared by the IBM Board of Directors on
January 28, 1997. In addition, you will also be asked to approve IBM's 1997
Long-Term Performance Plan, which provides for incentive and other awards that
are designed to provide participants with an increased proprietary interest in
our Company. Your vote on these matters is important and we appreciate your
continued support.
Please sign, date, and return the enclosed Proxy Card in the envelope provided
as soon as possible so that your shares can be voted at the meeting in
accordance with your instructions. If you plan to attend the meeting, please
mark the box where indicated on the Proxy Card. If you will need special
assistance at the meeting because of a disability, please contact the Office of
the Secretary, Armonk, N.Y. 10504.
Very truly yours,
/s/ Louis V. Gerstner, Jr.
Louis V. Gerstner, Jr.
Chairman of the Board
YOUR VOTE IS IMPORTANT
Please Sign, Date, and Return Your Proxy Card
1
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
2
<PAGE>
International Business Machines Corporation
Armonk, New York 10504
March 18, 1997
Notice of Meeting
The Annual Meeting of Stockholders of International Business Machines
Corporation will be held on Tuesday, April 29, 1997, at 10 a.m., in Section A
of the Dallas Convention Center, 650 South Griffin Street, Dallas, Texas. The
items of business are:
1. Election of directors for a term of one year.
2. Ratification of the appointment of auditors.
3. Amendment of the Certificate of Incorporation to increase authorized shares
and effect a two-for-one common stock split.
4. Adoption of the IBM 1997 Long-Term Performance Plan.
5. Such other matters, including one stockholder proposal, as may properly come
before the meeting.
These items are more fully described in the following pages, which are hereby
made a part of this Notice. Only stockholders of record at the close of business
on March 11, 1997, are entitled to vote at the meeting. Stockholders are
reminded that shares cannot be voted unless the signed Proxy Card is returned or
other arrangements are made to have the shares represented at the meeting.
/s/ John E. Hickey
- ---------------------------
John E. Hickey
Vice President and Secretary
This Proxy Statement and the accompanying form of Proxy Card are being mailed
beginning on or about March 18, 1997, to stockholders entitled to vote. The IBM
1996 Annual Report, which includes financial statements, is being mailed with
this Proxy Statement. Kindly notify First Chicago Trust Company of New York,
Mail Suite 4688, P.O. Box 2530, Jersey City, N.J. 07303-2530, telephone
201-324-0405, if you did not receive a report, and a copy will be sent to you.
3
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Table of Contents
Page
1. Election of Directors for a Term of One Year 5
General Information:
o Board of Directors 8
o Committees of the Board 8
o Other Relationships 10
o Directors' Compensation 10
o Section 16(a) Beneficial Ownership Reporting Compliance 11
o Ownership of Securities 11
- Security Ownership of Certain Beneficial Owners 11
- Common Stock and Total Stock-based Holdings of Management 12
Report on Executive Compensation 13
o Summary Compensation Table 17
o Performance Graph 23
2. Ratification of Appointment of Auditors 24
3. Amendment of the Certificate of Incorporation to Increase
Authorized Shares and Effect a Two-for-One Stock Split 25
4. Adoption of the IBM 1997 Long-Term Performance Plan 29
5. Stockholder Proposal 31
Other Business 33
Proxies and Voting at the Meeting 33
Appendix A: Proposed Amendment to Article THREE
of the Company's Certificate of Incorporation 35
Appendix B: IBM 1997 Long-Term Performance Plan 37
Appendix C: IBM 1997 Long-Term Performance Plan -
Federal Income Tax Consequences 45
4
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
1. Election of Directors for a Term of One Year
The Board proposes the election of the following directors of the Company for a
term of one year. Following is information about each nominee, including
biographical data for at least the last five years. Should one or more of these
nominees become unavailable to accept nomination or election as a director, the
individuals named as Proxies on the enclosed Proxy Card will vote the shares
that they represent for the election of such other persons as the Board may
recommend, unless the Board reduces the number of directors.
[PHOTOGRAPH]
CATHLEEN BLACK, 52, is president of Hearst Magazines, a division of The Hearst
Corporation, a diversified communications company. She is a member of IBM's
Directors and Corporate Governance Committee. Prior to joining Hearst Magazines,
she was president and chief executive officer of the Newspaper Association of
America from 1991 to 1996, president, then publisher, of USA TODAY from 1983 to
1991, and also executive vice president/marketing for Gannett Company, Inc.
(USA TODAY parent company) from 1985 to 1991. She is a director of The Hearst
Corporation, The Coca-Cola Company, the Advertising Council and a trustee of the
University of Notre Dame. Ms. Black became an IBM director in 1995.
[PHOTOGRAPH]
HAROLD BROWN, 69, is a counselor, Center for Strategic and International
Studies, Washington, D.C., and a general partner in Warburg, Pincus & Company, a
venture banking and money management firm. He is chairman of IBM's Directors and
Corporate Governance Committee and a member of IBM's Executive Committee. He is
a former U.S. Secretary of the Air Force. He is a director of Alumax Inc.,
Cummins Engine Company, Inc., Philip Morris Companies Inc., and Mattel, Inc.; a
member of the National Academy of Sciences and the National Academy of
Engineering; and a trustee and president emeritus of the California Institute of
Technology. Dr. Brown was an IBM director from 1972 to 1977. After serving as
U.S. Secretary of Defense, he became an IBM director again in 1981.
[PHOTOGRAPH]
JUERGEN DORMANN, 57, is chairman of the management board of Hoechst AG, a
chemicals and pharmaceuticals company. He is a member of IBM's Audit Committee.
Mr. Dormann joined Hoechst in 1963 and was elected finance and accounting
director in 1987 and to his present position in 1994. He is a director of
Allianz Lebensversicherungs AG. Mr. Dormann became an IBM director in 1996.
5
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[PHOTOGRAPH]
LOUIS V. GERSTNER, JR., 55, is chairman of the Board and chief executive officer
of IBM and chairman of IBM's Executive Committee. From 1989 until joining IBM,
he was chairman of the board and chief executive officer of RJR Nabisco Holdings
Corp., an international consumer products company. From 1985 to 1989, Mr.
Gerstner was president of American Express Company, and from 1983 to 1989, he
was chairman and chief executive officer of American Express Travel Related
Services Co., Inc. He is a member of the board of directors of Bristol-Myers
Squibb Company and The New York Times Company. Mr. Gerstner is vice chairman of
the board of the New American School Development Corp., a director of The
Council on Foreign Relations and a member of the Smithsonian Board of Regents.
Mr. Gerstner became an IBM director in 1993.
[PHOTOGRAPH]
NANNERL O. KEOHANE, 56, is president and professor of political science at Duke
University. She is a member of IBM's Directors and Corporate Governance
Committee. She was formerly president of Wellesley College, and a former faculty
member at Swarthmore College and Stanford University. She is a member of The
Council on Foreign Relations and the American Academy of Arts and Sciences, and
a trustee of the Colonial Williamsburg Foundation. Dr. Keohane is a member of
the MIT Corporation and has served as vice president of the American Political
Science Association. Dr. Keohane became an IBM director in 1986.
[PHOTOGRAPH]
CHARLES F. KNIGHT, 61, is chairman, chief executive officer and president of
Emerson Electric Co., an electronics company. He is chairman of IBM's Executive
Compensation and Management Resources Committee and a member of IBM's Executive
Committee. He joined Emerson Electric in 1972 as vice chairman and was elected
chief executive officer in 1973, chairman in 1974 and president in 1995. Prior
to joining Emerson, he was president of Lester B. Knight & Associates, Inc., a
consulting engineering firm. He is a director of SBC Communications Inc.,
Anheuser Busch Companies, Inc., and The British Petroleum Company p.l.c. Mr.
Knight became an IBM director in 1993.
[PHOTOGRAPH]
LUCIO A. NOTO, 58, is chairman and chief executive officer of Mobil Corporation,
an oil, gas and petrochemical company. He is a member of IBM's Audit Committee.
Mr. Noto joined Mobil in 1962 and was elected to Mobil's board in 1988. He was
elected chief financial officer in 1989, president and chief operating officer
in 1993, and to his present position in 1994. He also serves as chairman of
Mobil's executive committee. Mr. Noto is a member of The Council on Foreign
Relations and a member of the Board of Trustees of the Urban Institute. He
became an IBM director in 1995.
6
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[PHOTOGRAPH]
JOHN B. SLAUGHTER, 63, is president of Occidental College. He is a member of
IBM's Audit Committee. He is a former chancellor of the University of Maryland
and a former director of the National Science Foundation. He is a director of
the Atlantic Richfield Company, Avery Dennison Corporation, Monsanto Company,
and Northrop Grumman Corporation. He is a member of the National Academy of
Engineering, a member of the American Academy of Arts and Sciences, a fellow of
the American Association for the Advancement of Science, a fellow of the
Institute of Electrical and Electronics Engineers, and a member of the Hall of
Fame of the American Society for Engineering Education. Dr. Slaughter became an
IBM director in 1988.
[PHOTOGRAPH]
ALEX TROTMAN, 63, is chairman and chief executive officer of the Ford Motor
Company, an automotive manufacturer. He is a member of IBM's Executive
Compensation and Management Resources Committee. Mr. Trotman joined Ford of
Britain in 1955 and was elected president of Ford Asia-Pacific in 1983 and
chairman of Ford of Europe in 1988. He became president and chief operating
officer of Ford Automotive Group and a director in 1993. He was subsequently
elected to his present position in 1993. Mr. Trotman is a director of the New
York Stock Exchange. Mr. Trotman became an IBM director in 1994.
[PHOTOGRAPH]
LODEWIJK C. VAN WACHEM, 65, is chairman of the supervisory board of Royal Dutch
Petroleum Company, an oil, gas and petrochemical company. He is chairman of
IBM's Audit Committee and a member of IBM's Executive Committee. In 1992, Mr.
van Wachem retired as president of Royal Dutch Petroleum, a post he had held
since 1982. He is a director of ATCO Ltd., ABB Asea Brown Boveri Ltd., and
Zurich Versicherungs-Gesellschaft; and a member of the supervisory boards of
Akzo Nobel N.V., Philips Electronics N.V., and Bavarian Motor Works A.G. Mr. van
Wachem became an IBM director in 1992.
[PHOTOGRAPH]
CHARLES M. VEST, 55, is president and professor of mechanical engineering at the
Massachusetts Institute of Technology. He is a member of IBM's Executive
Compensation and Management Resources Committee. Dr. Vest was formerly the
provost and vice president for Academic Affairs of the University of Michigan.
He is a director of E. I. du Pont de Nemours and Company, a fellow of the
American Association for the Advancement of Science, a member of the National
Academy of Engineering and the Corporation of Woods Hole Oceanographic
Institution, and a trustee of Wellesley College. Dr. Vest became an IBM director
in 1994.
7
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
General Information
Board of Directors
The Board of Directors is responsible for supervision of the overall affairs of
the Company. To assist it in carrying out its duties, the Board has delegated
certain authority to several committees. Consistent with the Company's
long-standing practice, the majority of the Board, 10 of the 11 current
directors, are outside directors who are neither officers nor employees of IBM
or its subsidiaries. In the opinion of the Board, each of the outside directors
is independent of management and free of any relationship with the Company that
would interfere with his or her exercise of independent judgment in performing
the duties of a director.
In addition, the Audit Committee, the Directors and Corporate Governance
Committee, and the Executive Compensation and Management Resources Committee are
composed entirely of outside directors. The committees of the Board, as well as
the full Board, have access to outside consultants and experts as needed in
connection with their deliberations.
The Board of Directors held 10 meetings during 1996. Overall attendance at Board
and committee meetings was 92 percent. Attendance was at least 78 percent for
each director. Following the Annual Meeting, the Board will consist of 11
directors. In the interim between Annual Meetings, the Board has the authority
under the By-laws to increase or decrease the size of the Board and fill
vacancies.
Committees of the Board
The Executive Committee, the Audit Committee, the Directors and Corporate
Governance Committee, and the Executive Compensation and Management Resources
Committee are the standing committees of the Board of Directors.
Executive
Directors Compensation and
and Corporate Management
Executive Audit Governance Resources
- -------------------------------------------------------------------------------
L.V. Gerstner, Jr.* L.C. van Wachem* H. Brown* C.F. Knight*
H. Brown J. Dormann C. Black A. Trotman
C.F. Knight L.A. Noto N.O. Keohane C.M. Vest
L.C. van Wachem J.B. Slaughter
*Chairman
Executive Committee
The Executive Committee is empowered to act for the full Board in intervals
between Board meetings, with the exception of certain matters that by law may
not be delegated. The committee meets as necessary, and all actions by the
committee are reported at the next Board of Directors meeting. The committee did
not meet in 1996.
8
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Audit Committee
The Audit Committee is responsible for reviewing reports of the Company's
financial results, audits, internal controls, and adherence to its Business
Conduct Guidelines in compliance with federal procurement laws and regulations.
The committee recommends to the Board of Directors the selection of the
Company's outside auditors and reviews their procedures for ensuring their
independence with respect to the services performed for the Company.
The Audit Committee is composed of outside directors who are not officers or
employees of IBM or its subsidiaries. In the opinion of the Board, these
directors are independent of management and free of any relationship that would
interfere with their exercise of independent judgment as members of this
committee. The committee held four meetings in 1996.
Directors and Corporate Governance Committee
The Directors and Corporate Governance Committee is responsible for recommending
qualified candidates to the Board for election as directors of the Company,
including the slate of directors that the Board proposes for election by
stockholders at the Annual Meeting.
The committee advises and makes recommendations to the Board on all matters
concerning directorship practices, including retirement policies and
compensation for non-employee directors, and recommendations concerning the
functions and duties of the committees of the Board.
The committee reviews and considers the Company's position and practices on
significant issues of corporate public responsibility, such as equal employment
opportunity, protection of the environment, and philanthropic contributions, and
it reviews and considers stockholder proposals dealing with issues of public or
social interest. Members of this committee are outside directors who are not
officers or employees of IBM or its subsidiaries. In the opinion of the Board,
these directors are independent of management and free of any relationship that
would interfere with their exercise of independent judgment as members of this
committee. The committee held four meetings in 1996.
Stockholders wishing to recommend director candidates for consideration by the
committee may do so by writing to the Secretary of the Corporation, giving the
recommended candidate's name, biographical data, and qualifications.
Executive Compensation and Management Resources Committee
The Executive Compensation and Management Resources Committee has responsibility
for administering and approving all elements of compensation for elected
corporate officers and certain other senior management positions. It also
approves, by direct action or through delegation, participation in and all
awards, grants, and related actions under the provisions of the IBM Stock Option
Plans and the Long-Term Performance Plans, reviews changes in the IBM Retirement
Plan primarily affecting IBM corporate officers, and manages the operation and
administration of the IBM Extended Tax Deferred Savings Plan and the IBM
Supplemental Executive Retirement Plan. The committee reports to stockholders on
executive compensation items as required by the Securities and Exchange
Commission (page 13). The committee has responsibility for reviewing the
Company's management resources programs and for recommending qualified
candidates to the Board for election as officers.
9
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Members of this committee are outside directors who are not officers or
employees of IBM or its subsidiaries and are not eligible to participate in any
of the plans or programs that the committee administers. In the opinion of the
Board, these directors are independent of management and free of any
relationship that would interfere with their exercise of independent judgment as
members of this committee. The committee held five meetings in 1996.
Other Relationships
The Company and its subsidiaries purchase services, supplies, and equipment in
the normal course of business from many suppliers and similarly sell and lease
IBM products and services to many customers. In some instances, these
transactions occur between IBM and other companies for whom members of IBM's
Board serve as executive officers. In 1996, none of these transactions was
individually significant or reportable.
The Company has renewed its directors and officers indemnification insurance
coverage. This insurance covers directors and officers individually where
exposures exist other than those for which the Company is able to provide direct
indemnification. These policies run from June 30, 1996, through June 30, 1997,
at a total cost of $619,354. The primary carrier is Federal Insurance Company.
Directors' Compensation
Directors who are not employees of the Company receive an annual retainer of
$60,000 and each committee chairman receives an additional annual retainer of
$5,000. Sixty percent of the annual retainer fees is paid in Promised Fee Shares
of IBM common stock under the Directors Deferred Compensation and Equity Award
Plan (the "DCEAP"). Under the DCEAP, outside directors may defer all or part of
their remaining cash compensation to selected later years, to be paid either
with interest at a rate equal to the rate on 26-week U.S. Treasury bills updated
each January and July, or in Promised Fee Shares, with dividends used to buy
additional Promised Fee Shares. Promised Fee Shares are valued based on the
market price of IBM common stock and are payable in the form of IBM shares or
cash. All amounts under the DCEAP are to be paid only upon retirement or other
completion of service as a director. Employee directors receive no additional
compensation for service on the Board of Directors or its committees.
Under the IBM Non-Employee Directors Stock Option Plan, each outside director
receives an annual grant of options to purchase 1,000 shares of IBM common
stock. The exercise price of the options is the fair market value of IBM common
stock on the date of grant and each option has a term of ten years and becomes
exercisable in four equal installments commencing on the first anniversary of
the date of grant and continuing for the three successive anniversaries
thereafter. In the event of the retirement (as defined in the plan) or death of
an outside director, all options granted to such director shall become
immediately exercisable. Outside directors are provided group life insurance of
up to $50,000 and travel accident insurance in the amount of $300,000. Directors
are also eligible to participate in the Company's Matching Grants Program on the
same basis as the Company's employees.
The Directors and Corporate Governance Committee of the Board periodically
reviews IBM's director compensation practices and compares them against the
practices of the largest U.S. companies in terms of market capitalization. In
performing this review, the Committee focuses on ensuring that the Company's
outside directors have a proprietary stake in the Company and that the interests
of the directors continue to be closely
10
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
aligned with the interests of the Company's stockholders. The Committee
believes that the Company's total director compensation package continues to
be competitive with the compensation offered by other companies and is fair
and appropriate in light of the responsibilities and obligations of the
Company's outside directors.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 1996 all reports for the Company's executive
officers and directors that were required to be filed under Section 16 of the
Securities Exchange Act of 1934 were timely filed, except that a report was not
timely filed to reflect a purchase of IBM common stock by Mr. Knight.
Ownership of Securities
The following tables reflect shares of IBM common stock beneficially owned by
the named persons, and the directors and executive officers as a group, as of
December 31, 1996.
The tables indicate whether voting power and investment power in IBM common
stock are solely exercisable by the person named or shared with others. Voting
power includes the power to direct the voting of the shares held, and investment
power includes the power to direct the disposition of shares held. Also shown
are shares over which the named person could have acquired such powers within 60
days. Since some shares may appear under both the voting and investment power
columns, and since other types of holdings are listed only in the Stock or Total
column, the individual columns will not add across to the Total column.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the only persons known to the
Company to be beneficial owners of more than five percent of the Company's
common stock as of December 31, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Voting Power Investment Power
------------------------------------------------ Percent of
Name and Address Sole Shared Sole Shared Total(2) class(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FMR Corp. (1) 1,789,006 10,550 29,846,356 10,550 29,858,106 5.77%
82 Devonshire Street
Boston, Mass. 02109
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on Schedule 13G filed by FMR Corp. with the Securities and Exchange
Commission dated February 14, 1997. The Schedule 13G does not identify
any shares with respect to which there is a right to acquire beneficial
ownership. The Schedule 13G indicates that beneficial ownership of
substantially all of these shares arises through the investment advisory
activities of Fidelity Management & Research Company and the investment
management activities of Fidelity Management Trust Company, each a wholly
owned subsidiary of FMR Corp.
(2) The Schedule 13G additionally reports that Mr. Edward C. Johnson 3rd,
chairman of FMR Corp., and Ms. Abigail Johnson, director of FMR Corp.,
together with other family members who are part of a controlling group of
FMR Corp., are the beneficial owners of the same shares, except that Mr.
Johnson's sole voting power is with respect to 34,700 shares.
11
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Common Stock and Total Stock-Based Holdings of Management
The following table sets forth the beneficial ownership of shares of the
Company's common stock as well as all other IBM stock-based holdings as of
December 31, 1996, by IBM's current directors and nominees, the executive
officers named in the Summary Compensation Table on page 17 and the directors
and officers as a group, as of December 31, 1996. The Table indicates the
alignment of these individuals' personal financial interests with the interests
of the Company's stockholders because the value of their holdings will increase
or decrease in line with the price of IBM stock.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Voting Power Investment Power Total Acquirable
------------------------------------------- Stock-based within 60
Name Sole Shared Sole Shared Stock(1) holdings(2) days(3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Black 1,000 81 1,744 81 1,825 1,912 0
H. Brown 0 600 8,336 600 8,936 11,974 250
J. Dormann 1,000 0 1,277 0 1,277 1,277 0
L.V. Gerstner, Jr. 98,021 228 91,325 228 163,249 181,310 560,903
N.O.Keohane 0 498 3,848 498 4,346 5,135 250
C.F. Knight 2,434 0 4,385 0 4,385 4,842 250
N.C. Lautenbach 37,098 0 25,382 0 52,098 52,712 70,221
L.A. Noto 1,366 613 2,340 613 2,952 3,075 250
J.B. Slaughter 50 0 3,210 0 3,210 4,185 250
R.M. Stephenson 35,316 0 27,638 0 45,316 45,812 57,263
G.R. Thoman 14,513 0 13,174 0 29,513 31,202 79,158
J. M. Thompson 20,184 0 13,369 0 35,184 35,184 92,752
A. Trotman 1,000 1,000 1,976 1,000 2,976 3,141 250
L.C. van Wachem 1,000 0 1,798 0 1,798 2,545 250
C.M. Vest 100 0 696 0 696 897 250
- --------------------------------------------------------------------------------------------------------
Directors and executive
officers as a group(4) 269,436 10,806 228,933 10,806 455,400* 488,565 1,112,341*
- --------------------------------------------------------------------------------------------------------
</TABLE>
* The total of these two columns represents less than 1% of the outstanding
shares. No individual's beneficial holdings totaled more than 1/5 of 1% of
the outstanding shares. These holdings do not include 1,428,569 shares held
by the IBM Retirement Plan Trust Fund, over which the members of the Board
have the right to acquire shared investment power by withdrawing authority
now delegated to the Retirement Plans Committee, a management committee. The
directors and officers included in the table disclaim beneficial ownership
of shares beneficially owned by family members who reside in their
households. The shares are reported in such cases on the presumption that
the individual may share voting and/or investment power because of the
family relationship.
(1) For executive officers, this column includes shares shown in the "Voting
Power" and "Investment Power" columns as well as shares of restricted stock
held by the executive. For non-employee directors, this column includes
shares earned and accrued under the Directors Deferred Compensation and
Equity Award Plan. They have no voting power over such shares and investment
power only with regard to Promised Fee Shares that are acquired as a result
of deferring fees paid to them. Fractional shares attributable to
participation in this plan are not shown.
12
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(2) This column shows the total IBM stock-based holdings, including the
securities shown in the "Stock" column and other IBM stock-based interests,
including, as appropriate, employee contributions into the IBM Stock Fund
under the IBM Extended Tax Deferred Savings Plan ("ETDSP") and all Company
matching contributions under the ETDSP. This column also includes the
Promised Fee Shares payable in cash that were credited to the non-employee
directors in connection with the elimination of pension payments to such
directors.
(3) Shares that can be purchased under an IBM stock option plan.
(4) None of the directors or executive officers own any IBM preferred stock.
Report on Executive Compensation
The Executive Compensation and Management Resources Committee (the "Committee")
is responsible for administering the Company's executive compensation policies
and practices, and it approves all elements of compensation for elected
corporate officers and certain other senior management positions. In carrying
out its duties, the Committee has direct access to independent compensation
consultants and outside survey data. The Committee reports regularly to the
Board of Directors on its activities and obtains ratification by the
non-employee members of the Board of all items of compensation for the two
highest-paid executives. The Committee is comprised of three outside directors
who are not eligible to participate in any of the plans or programs that it
administers.
Compensation Philosophy and Practices
The Board believes that leadership and motivation of the Company's employees are
critical to establishing IBM's preeminence both in the marketplace and as an
investment for stockholders. The Committee is responsible to the Board for
ensuring that the individuals in executive positions are highly qualified and
that they are compensated in a way that furthers the Company's business
strategies and aligns their interests with those of the stockholders. To support
this philosophy, the following principles provide a framework for the
compensation program:
- - offer compensation opportunities that attract the best talent to IBM; motivate
individuals to perform at their highest levels; reward for outstanding
achievement; and retain those with the leadership abilities and skills
necessary for building long-term stockholder value.
- - maintain a significant portion of executives' total compensation at risk, tied
to both the annual and long-term financial performance of the Company as well
as to the creation of stockholder value.
- - encourage executives to manage from the perspective of owners with an equity
stake in the Company.
Beginning in 1994, Section 162(m) of the U.S. Internal Revenue Code of 1986
limits deductibility of compensation in excess of $1 million paid to the
Company's chief executive officer and any of the other four highest-paid
executive officers unless this compensation qualifies as "performance-based." In
1995, the Committee adopted, and the stockholders approved, terms under which
annual incentive compensation and Long-Term Performance Incentive awards should
not be subject to these deductibility limitations.
13
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
The Committee also amended IBM's Extended Tax Deferred Savings Plan to permit
an executive officer who is subject to Section 162(m) and whose salary is
above $1 million, to defer payment of a sufficient amount of the salary to
bring it below the Section 162(m) limit. Additionally, based on the
applicable tax regulations, any taxable compensation derived from the
exercise of stock options under the new IBM 1997 Long-Term Performance Plan,
the IBM 1994 Long-Term Performance Plan and prior Plans should be exempt from
this limit. The Committee is not precluded, however, from making compensation
payments under different terms even if they would not qualify for tax
deductibility under Section 162(m).
While performance against financial objectives is the primary measurement for
executive officers' annual incentive compensation, other factors also can affect
pay. Every executive, as well as every employee, is expected to uphold and
comply with IBM's Business Conduct Guidelines, which require the individual to
maintain the Company's discrimination-free workplace and high standards of
environmental protection. Upholding the Business Conduct Guidelines contributes
to the success of the individual employee, and to IBM as a whole.
IBM's compensation program for executive officers is targeted to provide total
compensation levels (including both annual and long-term incentives) which
approximate the 75th percentile of survey companies. Compensation is benchmarked
by independent consultants using surveys of both the information technology
industry and the largest U.S. market-capitalized companies. These firms have
executive positions similar to those at IBM in magnitude, complexity and scope
of responsibility, and they are representative of companies with whom IBM
competes for executive talent. This is a broader and more diverse set of
companies than those included in the S&P Computers (Hardware) Index used for the
Performance Graph on page 23.
Stock ownership guidelines have been established for senior management to
increase their equity stake in the Company and more closely link their interests
with those of the stockholders. These guidelines provide that within a five-year
period senior executives should attain an investment position in IBM stock or
stock units of two to four times their base salary depending on the individual's
responsibilities.
Components of Executive Compensation
The compensation program for executive officers consists of the following
components:
ANNUAL CASH COMPENSATION: includes base salary and any cash incentive or bonus
award earned for the year's performance. Both salary and the annual target
incentive opportunity are established for each executive officer based on job
responsibilities, level of experience, overall performance and contribution to
the business, as well as information obtained from external surveys. The annual
incentive awards for 1996 were tied to financial measures of net income and cash
flow with most of the weighting on net income, thereby establishing a direct
link between executive pay and Company profitability. The Committee approved the
financial targets early in the year and certified attainment at the end of the
performance period. The Committee used judgment based on accomplishments in
areas such as strategy, product and technology leadership, implementation of
key business programs and customer satisfaction to determine final incentive
amounts for the executive officers named in the Summary Compensation Table. The
Committee also made a cash award to each of the named executives in recognition
of the Company's highest reported earnings-per-share from operations ($11.06),
continued momentum in revenue growth (to record high-revenues of $75.9 billion),
and significant increase in the Company's market capitalization during 1996
(from $50 billion to $77 billion). The annual incentive and cash award are
reported in the "Bonus" column of the Summary Compensation Table on page 17.
14
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
LONG-TERM INCENTIVE COMPENSATION: includes stock options, Long-Term Performance
Incentive awards and restricted stock or restricted stock unit awards. The
objectives for these awards are to closely align executive interests with the
longer term interests of stockholders and to retain the skills that are critical
to the future success of the business. Stock options and long-term performance
incentive opportunities depend on the creation of incremental stockholder value
or the attainment of cumulative financial targets over three years. These
long-term grants represent a significant portion of the total compensation
opportunity provided to executive officers. Award sizes are based on individual
performance, level of responsibility, the executive's potential to make
significant contributions to the Company, and award levels at other companies
included in the surveys. Long-term incentives granted in prior years are also
taken into consideration.
- - Stock Options are typically granted annually to executives and other selected
employees whose contributions and skills are critical to the long-term success
of the Company. Options are granted with an exercise price equal to the market
price of the Company's common stock on the date of grant, vest over a period
of at least four years, and typically expire after ten years. These options
only have value to the recipients if the price of the Company's stock
appreciates after the options are granted.
- - Long-Term Performance Incentive (LTPI) awards provide senior management with
an incentive linked to both multiple year corporate financial performance and
stockholder value. Awards are intended to be made annually in the form of
performance stock units. For awards made in 1996 covering the period 1996-98,
the stock units can be earned based on achieving cumulative financial goals of
earnings-per-share and cash flow (with most of the weighting on
earnings-per-share). Depending on the level of performance against the
three-year goals, payout of the stock units can range between 0% to 150% of
the target awards, as shown in the Table on page 19. The stock units are
valued based upon the market price of the Company's common stock. For LTPI
awards made in 1994 covering the three-year period through 1996, the financial
goals were earnings-per-share and cash flow, equally weighted. Based on the
Company's performance for this period, the maximum number of stock units was
earned by the participants. Payouts for the named executives are reported in
the Summary Compensation Table on page 17.
- - Restricted Stock Unit awards are designed to provide long-term retention for
certain key members of senior management. These awards are highly selective,
limited to a very small group of executives, and equity-based so as to tie
them directly to stockholder return. The restriction period is normally five
years.
Compensation for the Chairman and Chief Executive Officer
On March 26, 1993, IBM entered into an employment agreement with Mr. Louis V.
Gerstner, Jr., to become chairman and chief executive officer of the Company.
Effective January 1, 1996, this agreement was amended to reduce Mr. Gerstner's
base salary by $500,000, increase his annual incentive target opportunity by an
equivalent amount, and increase his long-term performance incentive target
opportunity from $500,000 to at least $1,500,000. These actions were taken to
further align the chairman's annual and long-term compensation with the
performance of the Company. Mr. Gerstner's annual incentive payout was based on
the Company's 1996 financial performance (net income and cash flow) measured
against targets set early in
15
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
the year. As discussed above under Annual Cash Compensation, the Committee
also made a cash award to the chairman in recognition of the Company's
highest reported earnings-per-share from operations ($11.06), continued
momentum in revenue growth (to record-high revenues of $75.9 billion), and
significant increase in the Company's market capitalization during 1996 (from
$50 billion to $77 billion). The annual incentive and cash award for Mr.
Gerstner are reported in the "Bonus" column of the Summary Compensation Table
on page 17. He also earned a payout from the 1994-96 LTPI based on the
Company's cumulative financial results over the three-year period (discussed
above under Long-Term Performance Incentive), valued at $2,072,567. One-half
of this amount was paid in cash and the balance was delivered in stock units
that are restricted for two additional years. In 1996, the Committee granted
Mr. Gerstner a stock option covering 300,000 shares of IBM common stock. This
grant has a longer vesting period than typical IBM stock options. There is no
vesting for the first three years (until 1999), and then the options vest
over four years (ending in 2002). The Committee made the award to encourage
Mr. Gerstner to remain at IBM for an extended period of time. The grant was
based on the chairman's continued contributions to the Company's financial
performance; his effective leadership of a complex global business in a very
dynamic and competitive industry; and analyses prepared by an independent
consultant of stock option awards made to chief executive officers at other
major companies in the survey group.
The terms of Mr. Gerstner's employment agreement are described in the section
entitled, "Employment Agreements and Change-in-Control Arrangements" on page 22.
Charles F. Knight (chairman)
Alex Trotman
Charles M. Vest
16
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
<TABLE>
<CAPTION>
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------
Long-Term Compensation (1)
---------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Awards Options(#) Payouts Compensation
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. 1996 $1,500,000 $3,270,000 $ 0 $ 0 300,000 $ 2,072,567 $ 128,250(2)
Chairman and CEO 1995 2,000,000 2,775,000 0 7,044,375 100,000 1,274,663 138,000
1994 2,000,000 2,600,000 0 0 225,000 0 7,755,055
G. R. Thoman 1996 556,250 625,000 0 0 50,000 621,770 35,437(2)
Senior VP and CFO 1995 500,000 625,000 0 1,363,125 35,000 254,913 24,000
1994 500,000 300,000 0 0 50,000 0 2,248
J. M. Thompson 1996 556,250 603,000 0 0 50,000 621,770 166,133(3)
Senior VP 1995 493,334 725,000 0 1,363,125 40,000 318,689 112,048
1994 458,000 550,000 0 0 60,000 0 110,820
N.C. Lautenbach 1996 561,250 571,000 0 0 50,000 621,770 38,587(2)
Senior VP 1995 515,000 725,000 0 1,363,125 40,000 382,370 32,700
1994 490,000 575,000 0 0 60,000 0 2,250
R. M. Stephenson 1996 472,500 543,000 0 1,073,750 35,000 414,513 29,925(2)
Senior VP 1995 436,667 525,000 21,904(4) 0 23,100 191,233 61,609(5)
1994 430,000 399,000 262,845(4) 0 35,000 0 440,503(5)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) At the end of 1996, Mr. Gerstner held 29,289 performance stock units, 65,000
restricted stock units and 6,696 shares of restricted stock having a
combined value of $15,248,735; Mr. Thoman held 13,598 performance stock
units, 15,000 restricted stock units and 1,339 shares of restricted stock
having a combined value of $4,520,487; Mr. Thompson held 14,598 performance
stock units, 15,000 restricted stock units and 6,815 shares of restricted
stock having a combined value of $5,498,363; Mr. Lautenbach held 14,598
performance stock units; 15,000 restricted stock units and 11,716 shares of
restricted stock having a combined value of $6,238,414; and Mr. Stephenson
held 10,582 performance stock units, 10,000 restricted stock units and 7,678
shares of restricted stock having a combined value of $4,267,260. Restricted
stock and restricted stock units earn dividends and dividend equivalents at
the same rate as dividends paid to shareholders; otherwise, restricted
stock/unit awards have no value to the recipient until the restrictions are
released. No dividend equivalents are paid on outstanding performance stock
units.
(2) Represents the Company's contributions to the IBM Tax Deferred Savings Plan
("TDSP") and the Extended Tax Deferred Savings Plan ("ETDSP").
(3) Payments of $ 83,299 to equalize cost-of-living and housing differences, and
for certain other expenses, related to assignment outside of home country.
The balance represents payments for the value of benefits accrued prior to
transferring employment from IBM Canada.
(4) Reimbursement for tax liabilities related to payments for overseas
assignment (see footnote (5) below).
(5) Payments to equalize cost-of-living and housing differences, and for certain
other expenses, related to assignment outside of home country. Also includes
$2,018 for the Company's annual contribution to the TDSP in 1994 and $25,070
in 1995 for the Company's contributions to the TDSP and ETDSP.
17
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Stock Option/SAR Grants in Last Fiscal Year (1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Individual Grants
-------------------------------------------------- Potential Realizable Value at
Number % of Total Assumed Annual Rates of
of Securities Options/SARs Stock Price Appreciation for
Underlying Granted to Exercise Ten-Year Option Term (4)
Options/SARs Employees in Price Expiration ----------------------------------
Name Granted(2) Fiscal Year per Share Date 0% 5% 10%
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. 300,000(3) 3.91% $ 126.69 2/26/06 $ 0 $23,901,000 $60,573,000
G. R. Thoman 50,000 0.65% 126.69 2/26/06 0 3,983,500 10,095,500
J. M. Thompson 50,000 0.65% 126.69 2/26/06 0 3,983,500 10,095,500
N. C. Lautenbach 50,000 0.65% 126.69 2/26/06 0 3,983,500 10,095,500
R. M. Stephenson 35,000 0.46% 126.69 2/26/06 0 2,788,450 7,066,850
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in market value of IBM common stock for all stockholders at 5% (to $206/share) 10% (to $328/share)
assumed annual rates of stock price appreciation (as used in the ------------------ -------------------
table above) from $126.69 per share, over the ten-year period,
based on 508.0 million shares outstanding on December 31, 1996. $ 40.5 billion $ 102.6 billion
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights (SARs) were granted to the named executive
officers during 1996.
(2) Included in the total aggregate exercise price for the grants made to each
of Messrs. Thoman, Thompson, Lautenbach and Stephenson is approximately
$100,000 of Incentive Stock Options, which become exercisable along with the
balance of their grants in four equal installments commencing on the first
anniversary date. Upon retirement, all options continue to become
exercisable in accordance with their terms.
(3) Included in the total aggregate exercise price for the grant made to Mr.
Gerstner is approximately $400,000 of Incentive Stock Options, which become
exercisable along with the balance of his grant in four equal installments
commencing on the third anniversary date. Upon retirement, all options
continue to become exercisable in accordance with their terms. Mr.
Gerstner's grant also becomes exercisable on a termination without cause,
including upon a "change-in-control," as defined in his employment
agreement.
(4) Potential Realizable Value is based on the assumed annual growth rates for
each of the grants shown over their ten-year option term. For example, a 5%
annual growth rate results in a stock price of $206.36 per share and a 10%
rate results in a price of $328.60 per share. Actual gains, if any, on stock
option exercises are dependent on the future performance of the stock.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Shares Options/SARs at Fiscal Year-End Options/SARs at Fiscal Year-End
Acquired on Value ------------------------------- ----------------------------------
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. 51,489 $3,489,228 459,779 610,824 $45,294,138 $35,889,257
G. R. Thoman 27,562 1,664,879 45,311 112,127 4,031,036 6,661,702
J. M. Thompson 122,650 6,134,876 46,306 118,750 1,587,764 7,349,438
N. C. Lautenbach 162,053 10,377,633 23,164 118,261 512,803 7,313,888
R. M. Stephenson 123,818 5,247,974 27,219 75,586 635,197 4,500,023
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Long-Term Incentive Plans-Awards in Last Fiscal Year
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Performance or Estimated Future Payouts under
Number of Other Period Non-Stock Price-Based Plans(1)
Shares, Units Until Maturation -----------------------------------------------
Name or Other Rights or Payout Threshold(#)(2) Target(#) Maximum(#)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
L.V. Gerstner, Jr. 13,929 1/96-12/98 3,482 13,929 20,894
G.R. Thoman 6,000 1/96-12/98 1,500 6,000 9,000
J.M. Thompson 6,000 1/96-12/98 1,500 6,000 9,000
N.C. Lautenbach 6,000 1/96-12/98 1,500 6,000 9,000
R.M. Stephenson 5,000 1/96-12/98 1,250 5,000 7,500
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Long-Term Performance Incentive (LTPI) awards are denominated in Performance
Stock Units (PSUs) which are equivalent in value to IBM common stock. PSUs
are earned for achieving specified cumulative business objectives of
earnings-per-share and cash flow, weighted 80/20 respectively, over a
three-year performance period beginning 1/1/96 and ending 12/31/98.
Performance against each of the targets will be subject to separate payout
calculations. The target number of performance stock units will be earned if
100% of the objectives are achieved. The threshold number will be earned for
the achievement of 70% of the objectives and the maximum number will be
earned for achieving 120% of the objectives. No payout will be made for
performance below the threshold.
After the performance period, one-half of the earned performance stock units
will be paid in cash. The cash value for each performance stock unit will be
equal to the average closing price of one share of IBM common stock for the
month of January 1999. The balance of the performance stock units will be
paid in an equivalent number of stock units which will be restricted for a
two-year period ending 12/31/2000.
(2) The amounts in this column represent the threshold number that can be earned
if 70% attainment of both business objectives is achieved. In the event that
only one objective is achieved (at the 70% level), then the number of
performance stock units earned would be 80% of the threshold number based on
earnings-per-share achievement or 20% based on cash flow achievement.
19
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Retirement Plan
Executive officers participate in both the IBM Retirement Plan, a funded,
tax-qualified, defined benefit pension plan, and the Company's Supplemental
Executive Retirement Plan, an unfunded, non-qualified plan, (together referred
to as the "Plans"), as supplemented in the case of Messrs. Gerstner and Thoman
by separate arrangements.
For the named executive officers, other than Mr. Gerstner, retirement benefits
payable annually under the Plans are equal to the sum of:
(1) 1.7% times average annual compensation up to $192,000 over the final five
years of employment or the highest consecutive five calendar years of
compensation, whichever is greater, times years of service up to 20 years,
plus
(2) 2.55% of such compensation in excess of $192,000 times years of service up
to 20 years, plus
(3) 1.3% of such compensation times years of service between 20 and 30 years,
plus
(4) 0.75% of such compensation times years of service between 30 and 35 years
with no accruals past 35 years of service.
Compensation upon which benefits under the Plans are based include salary and
annual incentive.
Prior to any reduction for survivorship options and assuming there is no
forfeiture of benefits, estimated annual retirement benefits at age 60 for
Messrs. Stephenson, Thompson and Lautenbach, respectively, would be $546,000,
$688,000 and $696,000.
Mr. Gerstner's annual pension from the Company has been set at approximately
$1,140,000 pursuant to his employment agreement.
In connection with his employment by the Company in 1993, Mr. Thoman was given
credit under the IBM Plans for 16 years and 3 months of combined service at
American Express Company and RJR Nabisco to be used in the calculation of his
IBM pension. Further, he was promised that his IBM retirement pension would be
added to his American Express pension and that this would yield a combined
minimum life annuity of $450,000 annually provided he remains employed by the
Company until July 1, 1999. The minimum IBM annuity will be prorated if he
leaves the Company without cause before July 1, 1999, and forfeited if he leaves
the Company to accept employment with an IBM competitor except for a small
portion which he would retain provided he met the IBM Retirement Plan minimum
vesting requirement of 5 years of actual IBM service. At age 60 (in 2004), his
combined annual benefit including his benefit from the IBM Plans is currently
estimated at $592,000.
20
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Other Deferred Compensation Plans
The IBM Tax Deferred Savings Plan (the "TDSP") allows all eligible employees
to defer up to 12% of their income on a tax favored basis into a tax exempt
trust pursuant to Internal Revenue Service guidelines. IBM matches these
deferrals at the rate of 50% for the first 6% of compensation deferred. The
employee accounts are invested by the plan trustee in up to eleven investment
funds, including an IBM Stock Fund, as directed by the employees. Corporate
officers have participated in the TDSP since its inception in 1983 on the
same basis as all other employees except that they could not participate in
the IBM Stock Fund investment option. Commencing February 1, 1995, officers
are now permitted to invest in the TDSP's IBM Stock Fund consistent with the
Company's increased emphasis on stock ownership. Internal Revenue Service
limits on the TDSP preclude in 1997 an annual investment of more than $9,500
or an eligible compensation base of more than $160,000 for any one employee.
IBM established the Extended Tax Deferred Savings Plan (the "ETDSP") in 1995.
The ETDSP allows any U.S. executive, including officers, to defer additional
monies and receive a Company match on the same basis as the TDSP except that the
Company match for the ETDSP is credited only in units of IBM common stock which
are not transferable to other investment alternatives during employment. In
addition, participants can defer all or a portion of their annual incentive
until retirement under the ETDSP. In the event that the salary of a Company
officer who is subject to the limits of Section 162 (m) of the Code exceeds
$1,000,000, such officer may defer up to 100 percent of his or her salary. The
ETDSP is not funded and participants are general creditors of the Company. All
investments in the ETDSP earn income based on the results of the actual TDSP
funds' performance but the income is paid out of Company funds rather than the
actual returns on a dedicated investment portfolio.
21
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Employment Agreements and Change-in-Control Arrangements
The Company entered into an employment agreement with Mr. Gerstner as of March
26, 1993, whereby he serves as the chairman and chief executive officer of the
Company. Effective January 1, 1996, the employment agreement was amended to
provide that Mr. Gerstner's annual salary is at least $1,500,000, his annual
incentive target award opportunity is at least $2,000,000, and his annual
long-term performance incentive target award opportunity is at least $1,500,000.
In addition, the agreement provides Mr. Gerstner with an annual pension at age
60 from IBM of approximately $1,140,000.
In the event of termination without cause, or due to a "change-in-control" of
the Company, as defined in the agreement, Mr. Gerstner would receive 36 months
salary, prorated incentive payments, the right to exercise all stock options,
and other specified benefits. The Company has no other change-in-control
arrangements with any of its executive officers. There are no employment
agreements with the named executive officers, other than Mr. Gerstner, that
provide for their continuing service.
22
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Performance Graph
Comparison of Five-Year Cumulative Total Return for
IBM, S&P 500 Stock Index, and S&P Computers (Hardware) Index (excluding IBM)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IBM Common Stock. 100 60 69 92 115 193
S & P 500 Stock Index 100 108 118 120 165 203
S & P Computers (Hardware)
Index (excluding IBM) 100 111 111 146 218 263
</TABLE>
The above graph compares the five-year cumulative total return for IBM common
stock with the comparable cumulative return of two indexes. Since IBM is a
company within the Standard & Poor's ("S&P") 500 Stock Index, the Securities and
Exchange Commission's proxy rules require the use of that Index. Under those
rules, the second index used for comparison may be a published industry or
line-of-business index. In IBM's case, the S&P Computers (Hardware) Index
(excluding IBM), shown above, is such an index. Prior to June 1996, the S&P
Computers (Hardware) Index had been known as the S&P Computer Systems Index.
The graph assumes $100 invested on December 31, 1991, in IBM common stock and
$100 invested at that same time in each of the S&P indexes. The comparison
assumes that all dividends are reinvested.
23
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
2. Ratification of Appointment of Auditors
The Board of Directors has appointed the firm of Price Waterhouse LLP,
independent accountants, to be IBM's auditors for the year 1997 and recommends
to stockholders that they vote for ratification of that appointment.
Price Waterhouse LLP served in this capacity for the year 1996. Its
representative will be present at the Annual Meeting and will have an
opportunity to make a statement and be available to respond to appropriate
questions.
The appointment of auditors is approved annually by the Board and subsequently
submitted to the stockholders for ratification. The decision of the Board is
based on the recommendation of the Audit Committee, which reviews and approves
in advance the audit scope, the types of nonaudit services, and the estimated
fees for the coming year. The committee also reviews and approves proposed
nonaudit services to ensure that they will not impair the independence of the
accountants.
Before making its recommendation to the Board for appointment of Price
Waterhouse LLP, the Audit Committee carefully considered that firm's
qualifications as auditors for the Company. This included a review of its
performance in prior years, as well as its reputation for integrity and
competence in the fields of accounting and auditing. The committee has expressed
its satisfaction with Price Waterhouse LLP in all of these respects. The
committee's review included inquiry concerning any litigation involving Price
Waterhouse LLP and any proceedings by the Securities and Exchange Commission
against the firm. In this respect, the committee has concluded that the ability
of Price Waterhouse LLP to perform services for the Company is in no way
adversely affected by any such investigation or litigation.
The IBM Board of Directors recommends a vote FOR this proposal.
24
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
3. Amendment of the Certificate of Incorporation to Increase Authorized Shares
and Effect a Two-for-One Stock Split
On January 28, 1997, the Board of Directors unanimously adopted a resolution
declaring it advisable to amend the Company's Certificate of Incorporation to
increase the number of shares of stock that the Company has the authority to
issue to an aggregate of 2,025,000,000 shares, of which 1,875,000,000 would
be capital stock, $0.50 par value per share ("common stock"), and 150,000,000
of which would continue to be preferred stock, $0.01 par value per share, (the
"Amendments"). The Board of Directors further directed that the Amendments be
submitted for consideration by stockholders at the Company's Annual Meeting.
In the event the Amendments are approved by stockholders, the Company will
thereafter amend the Certificate of Incorporation (the "Certificate") with
the New York State Secretary of State with a filing reflecting such
Amendments, which will become effective at the close of business on the date
the Certificate is accepted for filing by the Secretary of State. The text of
Article THREE of the Certificate, as proposed to be amended, is set forth in
Appendix A, on page 35 of this Proxy Statement.
On January 28, 1997, the Board of Directors also unanimously adopted a
resolution authorizing and declaring, subject to approval by stockholders of the
Amendments, a two-for-one Stock Split, which split will provide one share of
common stock for each authorized share of common stock outstanding and reserved
for issuance to common stockholders of record at the close of business on May 9,
1997 (the "Stock Split Record Date").
In the event stockholders approve the Amendments, the Company will be
authorized to amend Article THREE of the Company's Certificate to increase
the number of shares of common stock which the Company is authorized to issue
from 750,000,000 to 1,875,000,000 and to decrease the par value per share of
such stock from $1.25 per share to $0.50 per share. This change to the par
value has been recommended by the Board in order to permit the Company to
save a significant amount of fees which would otherwise be payable under
state law upon the filing of the Certificate with the increase in the number
of authorized common stock requested by these Amendments. Approval of the
Amendments will also permit the Company to effect the split of the common
stock of the Company. Stockholder approval of an increase in the number of
authorized shares of common stock is required in order for the proposed
two-for-one Stock Split to be effected, and if the Amendments to the
Company's Certificate are not approved by the stockholders, the Stock Split
cannot be effected. If the proposed Amendments to the Certificate are
adopted, each share of common stock, held of record as of the close of
business on the Stock Split Record Date will be changed into two shares of
common stock. As a result of the change in par value, an amount equal to
$0.75 for each issued share of common stock (prior to the Stock Split) will
be reclassified from stated capital to capital surplus. As a result of the
Stock Split, an amount equal to the new par value of $0.50 per share of
common stock for each share issued in the Stock Split will be transferred
back to stated capital. In each case, there will be no change in the
Company's total paid-in capital. The split of the Company's common stock will
also include shares reserved for issuance under various stock option and
other plans including all shares of common stock authorized for issuance
under the 1997 IBM Long-Term Performance Plan being submitted herein for
stockholder approval (the "LTPP," see pages 29-30 and Appendices B and C
hereto), as well as those shares held by the Company as treasury shares on
such date.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
As of December 31, 1996, there were 509,070,542 shares of issued common stock,
of which 507,981,009 were outstanding and 1,089,533 were treasury shares. Of the
240,929,458 authorized but unissued shares, a total of 66,009,022 shares were
reserved for issuance under Company stock purchase, option and other benefit
plans for employees and directors, and the remaining 174,920,436 shares were
unreserved. Shares issued pursuant to the proposed Stock Split will have the
same rights as currently outstanding shares of common stock. Holders of common
stock do not have preemptive rights to subscribe to additional securities that
may be issued by the Company, which means that current stockholders do not have
a prior right to purchase any new issue of common stock of the Company in order
to maintain their proportionate ownership interest.
The Board believes that the proposed two-for-one split in the issued common
stock will result in a market price that should be more attractive to a
broader spectrum of investors, particularly individual investors. Based on
figures as of December 31, 1996, of the 1,875,000,000 shares of common stock
which would be authorized, 1,018,141,084 shares would be required to
effectuate the two-for-one split of the common shares outstanding and in
treasury. The aggregate number of shares that may be sold under each of the
Company's stock option, employee benefit and incentive plans, the number of
shares covered by outstanding options and restricted stock awards under such
Plans, and the exercise price of such options, will also be proportionately
adjusted to reflect the Stock Split. For example, the Stock Split will have
the effect of doubling the number of shares of common stock issuable upon
exercise of options and other rights granted under the Company's stock and
option plans, and of reducing by one-half the option price per share with
respect to such options and rights. The number of shares of restricted stock
and the number of restricted stock units granted to Company employees, and
common stock equivalents held by directors, officers and employees, will also
be doubled accordingly.
The Board of Directors also believes that it is in the Company's best interests
to increase the number of authorized but unissued shares of common stock in
order to have additional shares available for issuance to meet the Company's
future business needs as they arise. Other than the shares which are required to
effect the Stock Split, the Company's management has no present arrangements,
agreements, understandings or plans for the issuance or use of the additional
shares proposed to be authorized by the Amendments. The Board believes the
availability of such additional shares will provide the Company with the
flexibility to issue common stock for a variety of other proper corporate
purposes as the Board of Directors may deem advisable without further action by
the Company's stockholders, except as may be required by law, regulation or
stock exchange rule. These purposes could include, among other things, the sale
of stock to obtain additional capital funds, the purchase of property, the
acquisition or merger into the Company of other companies, the use of additional
shares for various equity compensation and other employee benefit plans, the
declaration of stock dividends or distributions, and other bona fide corporate
purposes. Were these situations to arise, the issuance of additional shares of
common stock could have a dilutive effect on earnings per share, and, for a
person who does not purchase additional shares to maintain his or her pro rata
interest, on a stockholder's percentage voting power in the Company.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Although an increase in the authorized shares of common stock could, under
certain circumstances, also be construed as having an anti-takeover effect (for
example, by diluting the stock ownership of a person seeking to effect a change
in the composition of the Board of Directors or contemplating a tender offer or
other transaction for the combination of the Company with another company), the
current Proposal to amend the Certificate is not in response to any effort to
accumulate the Company's stock or to obtain control of the Company by means of a
merger, tender offer, solicitation in opposition to management or otherwise. In
addition, the Proposal is not part of any plan by management to recommend a
series of similar amendments to the Board of Directors and the stockholders.
Finally, the Board does not currently contemplate recommending the adoption of
any other amendments to the Certificate which could be construed to affect the
ability of third parties to take over or change control of the Company.
In addition to the Company's common stock, the Company's Certificate of
Incorporation currently empowers the Board of Directors to authorize the
issuance of one or more series of preferred stock without stockholder
approval. Pursuant to this authorization, the Company has issued one series
of preferred stock, and, as of December 31, 1996, a total of 2,610,711 shares
of Series A 7 1/2% Preferred Stock were outstanding. No change to the
Company's preferred stock authorization is requested by the Amendments.
Existing Series A Preferred stockholders do not have preemptive rights, nor
any other participatory rights with respect to the matters covered by this
Proposal.
In the event this Proposal is approved, certificates representing shares of the
Company's common stock issued prior to the time the Stock Split becomes
effective will continue to represent the same number of shares of the Company's
stock as they did prior to such time. Each common stockholder of record at the
close of business on the Stock Split Record Date will be entitled to receive one
additional share of common stock for each share of common stock held on such
date. Distribution of the additional shares is presently expected to occur on
May 27, 1997, and will be effected in book-entry form, through the mailing of an
account statement to each stockholder of record as of the Stock Split Record
Date, crediting the additional shares of common stock as a result of the Stock
Split. Stockholders of record as of the Stock Split Record Date may request a
physical certificate from the Company's transfer agent for the additional shares
they are entitled to receive as a result of the Stock Split. In the event this
Proposal is approved, additional instructions will be mailed to stockholders on
May 27, 1997.
Existing certificates will continue to represent the number of shares evidenced
thereby. Existing certificates will not be exchanged for new certificates.
Please do not return any certificates to the Company or our transfer agent.
If the Proposal is approved, the Company will also apply to the New York Stock
Exchange, as well as various other exchanges upon which the Company's common
stock is listed, for the continued listing of the Company's common stock on a
split basis.
27
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
The Company has been advised by its tax counsel that under U.S. federal income
tax laws the receipt of additional shares of common stock in the Stock Split
will not constitute taxable income to the stockholders. In addition, the cost or
other tax basis to a stockholder of each old share held immediately prior to the
split will be divided equally between the corresponding two shares held
immediately after the split, and the holding period for each of the two shares
will include the period for which the corresponding old share was held. The laws
of jurisdictions other than the United States may impose income taxes on the
receipt by a stockholder of additional shares of common stock resulting from the
split. Stockholders subject to such other laws should consult with their own tax
advisors for additional information.
If a stockholder elects to sell or purchase shares of the Company's common stock
following the effectuation of the Stock Split, stock transfer taxes, if
applicable, may be higher in a transaction involving an equivalent aggregate
market value, because of the greater number of shares involved, and the
brokerage commissions associated with such activities may also be higher.
Stockholders may wish to determine from their brokers the taxes and commissions
applicable for the additional number of shares.
Financial Statements are not included in this Proxy Statement, as they are not
deemed material to the exercise of prudent judgment with respect to the proposed
amendment of the Company's Certificate of Incorporation and the Stock Split.
Since the Amendments and the Stock Split are in the best interest of the Company
and its stockholders, the IBM Board of Directors recommends a vote FOR this
Proposal.
28
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
4. Adoption of the IBM 1997 Long-Term Performance Plan
The Board of Directors has adopted the IBM 1997 Long-Term Performance Plan
("1997 LTPP") and is recommending that stockholders approve the 1997 LTPP at the
Annual Meeting. The 1997 LTPP provides for incentive and other awards that are
designed to foster a proprietary interest in the growth and performance of the
Company.
The 1997 LTPP permits the grant of any form of award, including, but not limited
to, stock options, stock appreciation rights ("SARs") and stock and cash awards,
whether granted singly, in combination or in tandem. During any five-year
period, no participant may receive stock options or SARs with respect to an
aggregate of more than 2,500,000 shares. Stock options will be granted at an
exercise price of not less than 100% of fair market value (as defined in the
plan) on the date of grant and it is expected that options and SARs will
typically be granted for periods of 10 years or less. The 1997 LTPP also permits
the grant of other awards in stock or denominated in units of stock, which may
be subject to restrictions on transfer and/or forfeiture provisions. The maximum
number of shares of common stock that may be issued under stock awards under the
1997 LTPP will not exceed 20% of the aggregate number of shares available for
issuance under the 1997 LTPP.
If approved by stockholders, the Board has authorized for issuance under the
1997 LTPP 25,148,227 shares of common stock, which is 5% of the Company's
outstanding shares of common stock on February 10, 1997. The closing price of
the Company's common stock on the New York Stock Exchange that day was $142.75
per share. Subject to stockholder approval of Proposal 3, as set forth beginning
on page 25, the shares available for issuance under the 1997 LTPP shall be
doubled to reflect the proposed two-for-one stock split.
For purposes of determining the number of shares of common stock issued under
the 1997 LTPP, no shares shall be deemed issued until they are actually
delivered to a participant, or such other person in accordance with Section 10
of the 1997 LTPP. Shares covered by awards that either wholly or in part are not
earned, or that expire or are forfeited, terminated, canceled, settled in cash,
payable solely in cash or exchanged for other awards, shall be available for
future issuance under awards. Further, shares tendered to or withheld by the
Company in connection with the exercise of stock options, or the payment of tax
withholding on any award, shall also be available for future issuance under
awards.
At the 1994 Annual Meeting, stockholders approved the 1994 Long-Term Performance
Plan ("1994 LTPP") to replace the 1989 Long-Term Performance Plan. As of the
date of the Annual Meeting, it is expected that approximately 3.8 million shares
will remain available for grant under the 1994 LTPP, and the Company intends to
continue to grant awards under the 1994 LTPP until the plan expires.
It is intended that the 1997 LTPP will generally be administered by the
Executive Compensation and Management Resources Committee (or any successor
committee), which is constituted in compliance with the rules and regulations
issued under the federal securities laws and the Internal Revenue Code. In
administering the 1997 LTPP, the Committee has the full power to select
participants, to interpret the provisions of the plan, to grant waivers of award
restrictions, to continue or accelerate the exercisability, vesting or payment
of an award and to adopt such rules, regulations and guidelines for carrying out
the 1997 LTPP as it may deem necessary or proper. The Committee may delegate
certain of its duties, power and
29
<PAGE>
IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
authority to officers of the Company, pursuant to such conditions and
limitations as the Committee may establish. The 1997 LTPP may be amended by
the Board, except that it may not be amended to increase the maximum number
of shares that may be issued under the 1997 LTPP (except for adjustments
pursuant to Section 14 of the 1997 LTPP) or to permit the granting of stock
options or stock appreciation rights with exercise or grant prices lower than
those specified in Section 6 of the 1997 LTPP, without stockholder approval.
Awards under the 1997 LTPP may be made to employees of, and other individuals
providing services to, the Company. Participants in the 1997 LTPP will be
recommended by their management and the Committee intends to review and act on
all 1997 LTPP grants and awards for elected officers and certain other senior
management positions. Subject to stockholder approval of the 1997 LTPP, the
Committee intends to delegate to the chief executive officer the authority to
make grants and awards, waive restrictions and take other actions under the 1997
LTPP for certain other eligible participants. As the participants in the 1997
LTPP will be selected by the Committee and management in their discretion, it is
not possible to indicate the number or names of positions or participants who
may be eligible for awards under the 1997 LTPP and no allocation or other
determination has been made as to the types or amounts of awards that may be
made. During 1996, options to purchase 7,679,529 shares were granted to
employees, including options to purchase 669,000 shares granted to current
executive officers as a group. In 1996, the number of performance stock units
representing Long-Term Performance Incentive awards granted to all participants
and current executive officers was 375,738 and 63,929, respectively. A total of
209,269 restricted stock units were granted in 1996, including 88,500 units to
current executive officers. Further, 117,130 shares of restricted stock were
granted to employees, none of which was granted to current executive officers.
For additional information on awards in 1996 to the named executive officers,
refer to the tables on pages 17-19. No awards under the 1994 LTPP were made to
directors who are not executive officers.
As discussed in the Report on Executive Compensation, the 1997 LTPP has been
designed to meet the requirements of 162(m) of the Internal Revenue Code for
stock options and SARs. At the Company's 1995 Annual Meeting, stockholders
approved terms adopted by the Committee under which other long-term incentive
compensation payable under the 1994 LTPP would qualify for an exception from the
limitations on deductibility set forth in section 162(m). The Committee will
continue to make long-term performance incentive awards under the 1997 LTPP
pursuant to those terms. The foregoing shall not preclude the Committee from
making other compensation payments under different terms even if they do not
qualify for tax deductibility under section 162(m).
The foregoing summary of the terms and features of the 1997 LTPP is qualified by
reference to the 1997 LTPP itself. The 1997 LTPP is printed in its entirety as
Appendix B beginning on page 37 and the federal income tax consequences of the
issuance and exercise of options and SARs are summarized in Appendix C beginning
on page 45. The IBM Board of Directors recommends a vote FOR this proposal.
30
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
5. Stockholder Proposal
Stockholder proposals may be submitted for inclusion in IBM's 1998 proxy
material after the 1997 Annual Meeting but received no later than 5 p.m. EST on
November 19, 1997. Proposals must be in writing and sent via registered,
certified, or express mail to: Office of the Secretary, International Business
Machines Corporation, One Old Orchard Road, Armonk, N.Y. 10504. Facsimile or
other forms of electronic submissions will not be accepted.
Management carefully considers all proposals and suggestions from stockholders.
When adoption is clearly in the best interests of the Company and stockholders,
and can be accomplished without stockholder approval, the proposal is
implemented without inclusion in the proxy material.
Examples of stockholder proposals and suggestions that have been adopted over
the years include stockholder ratification of the appointment of auditors,
improved procedures involving dividend checks and stockholder publications, and
changes or additions to the proxy material concerning such matters as
abstentions from voting, appointment of alternative proxy, inclusion of a table
of contents, proponent disclosure, and secrecy of stockholder voting.
Management opposes the following proposal for the reasons stated after the
proposal.
Stockholder Proposal on Executive Compensation
Management has been advised that Mrs. Evelyn Y. Davis, Watergate Office
Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, the
owner of 50 shares, intends to submit the following proposal at the meeting:
RESOLVED: "That the stockholders recommend that the Board take the necessary
step that IBM specifically identify by name and corporate title in all future
proxy statements those executive officers, not otherwise so identified, who are
contractually entitled to receive in excess of $250,000 annually as a base
salary, together with whatever other additional compensation bonuses and other
cash payments were due them."
REASONS: "In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources utilized."
"At present only a few of the most senior executive officers are so identified,
and not the many other senior executive officers who should contribute to the
ultimate success of the Corporation." "Through such additional identification
the shareholders will then be provided an opportunity to better evaluate the
soundness and efficacy of the overall management."
"If you AGREE, please mark your proxy FOR this proposal."
- --------------------------------------------------------------------------------
The IBM Board of Directors recommends a vote AGAINST this proposal.
31
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
The Proposal is not currently relevant to the Company since it calls for
disclosure of contractual employment obligations which are already fully
disclosed in this Proxy Statement. In this connection, Mr. Gerstner, the
Chairman and Chief Executive Officer of the Company, is the only executive
officer with an employment contract who is entitled to receive a salary and
other amounts on account of his employment with the Company. Mr. Gerstner's
employment contract, as well as other details of his compensation
arrangements, is already described on pages 15-16 of this Proxy Statement in
full compliance with the regulations of the Securities and Exchange
Commission. Moreover, under these same regulations, the Company already
provides detailed information about the overall compensation arrangements of
its four other highest paid executive officers. The Executive Compensation
and Management Resources Committee of the Board, which is comprised solely of
non-employee directors, reviews and approves the compensation of all
executive officers of the Company. Since implementation of the Proposal would
add nothing to the Company's current disclosures, and since the Proposal
attempts to impose future obligations beyond what is required by the law as
well as beyond what other companies disclose, the Board believes the Proposal
is unnecessary and should be rejected. The Board believes that the existing
disclosure adequately and fairly describes the compensation structure for
IBM's executive officers as well as furnishes an informed basis for IBM
stockholders to evaluate the Company's use of compensation to motivate and
retain its key personnel.The Board therefore recommends a vote AGAINST this
Proposal.
32
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Other Business
Management knows of no other matters that may properly be, or are likely to be,
brought before the meeting. If other proper matters are introduced, the
individuals named as Proxies on the enclosed Proxy Card will vote shares it
represents.
Proxies and Voting at the Meeting
The $1.25 par value capital stock of the Company (its common stock) is its
only class of security entitled to vote at the April 29, 1997, meeting. Each
stockholder of record at the close of business on March 11, 1997, is entitled
to one vote for each share held. The Proxy Card covers the number of shares
to be voted, including any shares held for participants in the IBM Tax
Deferred Savings Plan, Dividend Reinvestment Plan and Employees Stock
Purchase Plans. On February 10, 1997, there were 502,964,546 common shares
outstanding and entitled to be voted.
Directors are elected by a plurality of votes cast. A majority of the votes cast
is required to ratify the appointment of auditors and to recommend that the
Board consider adoption of a stockholder proposal. Under the law of New York,
IBM's state of incorporation, "votes cast" at a meeting of stockholders by the
holders of shares entitled to vote are determinative of the outcome of the
matter subject to vote. Abstentions, broker non-votes, and withheld votes will
not be considered "votes cast" based on current state law requirements and IBM's
Certificate of Incorporation and By-laws. The amendment of the Company's
Certificate of Incorporation and the adoption of the IBM 1997 Long-Term
Performance Plan each require the favorable vote of the holders of a majority of
all outstanding shares of common stock of the Company, pursuant to the
requirements of the New York Business Corporation Law.
All stockholder meeting proxies, ballots, and tabulations that identify
individual stockholders are kept secret, and no such document shall be available
for examination, nor shall the identity or the vote of any stockholder be
disclosed except as may be necessary to meet legal requirements under the laws
of New York, IBM's state of incorporation. Votes are counted by employees of
First Chicago Trust Company of New York, IBM's independent transfer agent and
registrar, and certified by the Inspectors of Election who are employees of
Corporation Trust Company.
Shares cannot be voted unless a signed Proxy Card is returned or other specific
arrangements are made to have shares represented at the meeting. Any stockholder
giving a proxy may revoke it at any time before it is voted. If a stockholder
wishes to give a proxy to someone other than the individuals named as Proxies on
the Proxy Card, he or she may cross out the names appearing on the enclosed
Proxy Card, insert the name of some other person, sign, and give the Proxy Card
to that person for use at the meeting.
33
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
Stockholders are encouraged to specify their choices by marking the appropriate
boxes on the enclosed Proxy Card. Shares will be voted in accordance with such
instructions. However, it is not necessary to mark any boxes if you wish to vote
in accordance with the Board of Directors' recommendations; merely sign, date,
and return the Proxy Card in the enclosed envelope.
Solicitation of proxies is being made by the Company through the mail, in
person, and by telecommunications. The cost thereof will be borne by the
Company. In addition, management has retained Morrow & Co., Inc., to assist in
soliciting proxies for a fee of approximately $35,000, plus reasonable
out-of-pocket expenses.
/s/ John E. Hickey
John E. Hickey
Vice President and Secretary
March 18, 1997
34
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
APPENDIX A.
Proposed Amendment to Article THREE of the Company's Certificate of
Incorporation
Resolved: that the Company's Certificate of Incorporation be amended by
restating Article THREE thereof to read as follows:
The aggregate number of shares that the Corporation shall have authority to
issue is 2,025,000,000 shares, consisting of 1,875,000,000 shares of the par
value of $0.50 per share, which shall be designated "capital stock," and
150,000,000 shares of the par value of $0.01 per share, which shall be
designated "preferred stock."
35
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
36
<PAGE>
APPENDIX B.
IBM 1997 Long-Term Performance Plan
1. Objectives.
The IBM 1997 Long-Term Performance Plan (the "Plan") is designed to attract,
motivate and retain selected employees of, and other individuals providing
services to, the Company. These objectives are accomplished by making long-term
incentive and other awards under the Plan, thereby providing Participants with a
proprietary interest in the growth and performance of the Company.
2. Definitions.
(a) "Awards" -- The grant of any form of stock option, stock appreciation right,
stock or cash award, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms, conditions, performance requirements,
limitations and restrictions as the Committee may establish in order to fulfill
the objectives of the Plan.
(b) "Award Agreement" -- An agreement between the Company and a Participant that
sets forth the terms, conditions, performance requirements, limitations and
restrictions applicable to an Award.
(c) "Board" -- The Board of Directors of International Business Machines
Corporation ("IBM").
(d) "Capital Stock" or "stock" -- Authorized and issued or unissued Capital
Stock of IBM, at such par value as may be established from time to time.
(e) "Code" -- The Internal Revenue Code of 1986, as amended from time to time.
(f) "Committee" -- The committee designated by the Board to administer the Plan.
(g) "Company" -- IBM and its affiliates and subsidiaries including subsidiaries
of subsidiaries and partnerships and other business ventures in which IBM has an
equity interest.
(h) "Fair Market Value" -- The average of the high and low prices of Capital
Stock on the New York Stock Exchange for the date in question, provided that, if
no sales of Capital Stock were made on said exchange on that date, the average
of the high and low prices of Capital Stock as reported for the most recent
preceding day on which sales of Capital Stock were made on said exchange.
(i) "Participant" -- An individual to whom an Award has been made under the
Plan. Awards may be made to any employee of, or any other individual providing
services to, the Company. However, incentive stock options may be granted only
to individuals who are employed by IBM or by a subsidiary corporation (within
the meaning of Section 424(f) of the Code) of IBM, including a subsidiary that
becomes such after the adoption of the Plan.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
3. Capital Stock Available for Awards.
The number of shares that may be issued under the Plan for Awards granted wholly
or partly in stock during the term of the Plan is 25,148,227. Shares of Capital
Stock may be made available from the authorized but unissued shares of the
Company or from shares held in the Company's treasury and not reserved for some
other purpose. For purposes of determining the number of shares of Capital Stock
issued under the Plan, no shares shall be deemed issued until they are actually
delivered to a Participant, or such other person in accordance with Section 10.
Shares covered by Awards that either wholly or in part are not earned, or that
expire or are forfeited, terminated, canceled, settled in cash, payable solely
in cash or exchanged for other awards, shall be available for future issuance
under Awards. Further, shares tendered to or withheld by the Company in
connection with the exercise of stock options, or the payment of tax withholding
on any Award, shall also be available for future issuance under Awards.
4. Administration.
The Plan shall be administered by the Committee, which shall have full power to
select Participants, to interpret the Plan, to grant waivers of Award
restrictions, to continue, accelerate or suspend exercisability, vesting or
payment of an Award and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper. These powers include,
but are not limited to, the adoption of modifications, amendments, procedures,
subplans and the like as are necessary to comply with provisions of the laws and
regulations of the countries in which the Company operates in order to assure
the viability of Awards granted under the Plan and to enable Participants
regardless of where employed to receive advantages and benefits under the Plan
and such laws and regulations.
5. Delegation of Authority.
The Committee may delegate to officers of the Company its duties, power and
authority under the Plan pursuant to such conditions or limitations as the
Committee may establish, except that only the Committee or the Board may select,
and grant Awards to, Participants who are subject to Section 16 of the
Securities Exchange Act of 1934.
6. Awards.
The Committee shall determine the type or types of Award(s) to be made to each
Participant and shall set forth in the related Award Agreement the terms,
conditions, performance requirements, and limitations applicable to each Award.
Awards may include but are not limited to those listed in this Section 6. Awards
may be granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement or payment of, or as alternatives
to, grants, rights or compensation earned under any other plan of the Company,
including the plan of any acquired entity. During any five-year period, no
Participant may receive, under the Plan, stock options or stock appreciation
rights with respect to an aggregate of more than 2,500,000 shares.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(a) Stock Option -- A grant of a right to purchase a specified number of
shares of Capital Stock the exercise price of which shall be not less than
100% of Fair Market Value on the date of grant of such right, as determined
by the Committee, provided that, in the case of a stock option granted
retroactively in tandem with or as substitution for another award granted
under any plan of the Company, the exercise price may be the same as the
purchase or designated price of such other award. A stock option may be in
the form of an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code. The number of shares of
stock that shall be available for issuance under ISO's granted under the Plan
is limited to ten million.
(b) Stock Appreciation Right -- A right to receive a payment, in cash and/or
Capital Stock, equal in value to the excess of the Fair Market Value of a
specified number of shares of Capital Stock on the date the stock appreciation
right (SAR) is exercised over the grant price of the SAR, which shall not be
less than 100% of the Fair Market Value on the date of grant of such SAR, as
determined by the Committee, provided that, in the case of a SAR granted
retroactively in tandem with or as substitution for another award granted under
any plan of the Company, the grant price may be the same as the exercise or
designated price of such other award.
(c) Stock Award -- An Award made in stock and denominated in units of stock. The
maximum number of shares of Capital Stock that may be issued under Stock Awards
shall not exceed 20% of the aggregate number of shares available for issuance
under Awards. All or part of any stock award may be subject to conditions
established by the Committee, and set forth in the Award Agreement, which may
include, but are not limited to, continuous service with the Company,
achievement of specific business objectives, increases in specified indices,
attaining growth rates, and other comparable measurements of the Company
performance. An Award made in stock or denominated in units of stock that is
subject to restrictions on transfer and/or forfeiture provisions may be referred
to as an Award of "Restricted Stock," "Restricted Stock Units" or "Long-Term
Performance Incentive" units.
(d) Cash Award -- An Award denominated in cash with the eventual payment amount
subject to future service and such other restrictions and conditions as may be
established by the Committee, and as set forth in the Award Agreement,
including, but not limited to, continuous service with the Company, achievement
of specific business objectives, increases in specified indices, attaining
growth rates, and other comparable measurements of Company performance.
At the Company's 1995 Annual Meeting, shareholders approved terms adopted by the
Committee under which long-term incentive compensation payable under the
Company's 1994 Long-Term Performance Plan would qualify for an exception from
the limitations on deductibility set forth in section 162(m) of the Code. The
Committee shall continue to make long-term performance incentive awards under
the Plan pursuant to those terms. The foregoing shall not preclude the Committee
from making other compensation payments under different terms even if they do
not qualify for tax deductibility under section 162(m).
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
7. Payment of Awards.
Payment of Awards may be made in the form of cash, stock or combinations
thereof and may include such restrictions as the Committee shall determine.
Further, with Committee approval, payments may be deferred, either in the
form of installments or as a future lump-sum payment, in accordance with such
procedures as may be established from time to time by the Committee. Any
deferred payment, whether elected by the Participant or specified by the
Award Agreement or the Committee, may require the payment to be forfeited in
accordance with the provisions of Section 13. Dividends or dividend
equivalent rights may be extended to and made part of any Award denominated
in stock or units of stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also establish
rules and procedures for the crediting of interest on deferred cash payments
and dividend equivalents for deferred payments denominated in stock or units
of stock. At the discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards of the same or
different type.
8. Stock Option Exercise.
The price at which shares of Capital Stock may be purchased under a stock option
shall be paid in full in cash at the time of the exercise or, if permitted by
the Committee, by means of tendering Capital Stock or surrendering another Award
or any combination thereof. The Committee shall determine acceptable methods of
tendering Capital Stock or other Awards and may impose such conditions on the
use of Capital Stock or other Awards to exercise a stock option as it deems
appropriate.
9. Tax Withholding.
Prior to the payment or settlement of any Award, the Participant must pay, or
make arrangements acceptable to the Company for the payment of, any and all
federal, state and local tax withholding that in the opinion of the Company is
required by law. The Company shall have the right to deduct applicable taxes
from any Award payment and withhold, at the time of delivery or vesting of
shares under the Plan, an appropriate number of shares for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes.
10. Transferability.
No Award shall be transferable or assignable, or payable to or exercisable by,
anyone other than the Participant to whom it was granted, except (i) by law,
will or the laws of descent and distribution, (ii) as a result of the disability
of a Participant or (iii) that the Committee (in the form of an Award Agreement
or otherwise) may permit transfers of Awards by gift or otherwise to a member of
a Participant's immediate family and/or trusts whose beneficiaries are members
of the Participant's immediate family, or to such other persons or entities as
may be approved by the Committee. Notwithstanding the foregoing, in no event
shall ISOs be transferable or assignable other than by will or by the laws of
descent and distribution.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
11. Amendment, Modification, Suspension or Discontinuance of the Plan.
The Board may amend, modify, suspend or terminate the Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other purpose
permitted by law. Subject to changes in law or other legal requirements that
would permit otherwise, the Plan may not be amended without the consent of the
holders of a majority of the shares of Capital Stock then outstanding, to (i)
increase the aggregate number of shares of Capital Stock that may be issued
under the Plan (except for adjustments pursuant to Section 14 of the Plan), or
(ii) permit the granting of stock options or SARs with exercise or grant prices
lower than those specified in Section 6.
12. Termination of Employment.
If the employment of a Participant terminates, other than as a result of the
death or disability of a Participant, all unexercised, deferred and unpaid
Awards shall be canceled immediately, unless the Award Agreement provides
otherwise. In the event of the death of a Participant or in the event a
Participant is deemed by the Company to be disabled and eligible for benefits
under the terms of the IBM Long-Term Disability Plan (or any successor plan
or similar plan of another employer), the Participant's estate, beneficiaries
or representative, as the case may be, shall have the rights and duties of
the Participant under the applicable Award Agreement.
13. Cancellation and Rescission of Awards.
(a) Unless the Award Agreement specifies otherwise, the Committee may cancel,
rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid,
or deferred Awards at any time if the Participant is not in compliance with all
applicable provisions of the Award Agreement and the Plan, or if the Participant
engages in any "Detrimental Activity." For purposes of this Section 13,
"Detrimental Activity" shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company's
business, without prior written authorization from the Company, of any
confidential information or material, as defined in the Company's Agreement
Regarding Confidential Information and Intellectual Property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company's Agreement Regarding
Confidential Information and Intellectual Property, all right, title and
interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of the Company or
the failure or refusal to do anything reasonably necessary to enable the Company
to secure a patent where appropriate in the United States and in other
countries; (iv) activity that results in termination of the Participant's
employment for cause; (v) a violation of any rules, policies, procedures or
guidelines of the Company, including but not limited to the Company's Business
Conduct Guidelines; (vi) any attempt directly or indirectly to induce any
employee of the Company to be employed or perform services
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
elsewhere or any attempt directly or indirectly to solicit the trade or
business of any current or prospective customer, supplier or partner of the
Company; (vii) the Participant being convicted of, or entering a guilty plea
with respect to, a crime, whether or not connected with the Company; or
(viii) any other conduct or act determined to be injurious, detrimental or
prejudicial to any interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the Participant
shall certify in a manner acceptable to the Company that he or she is in
compliance with the terms and conditions of the Plan. In the event a Participant
fails to comply with the provisions of paragraphs (a)(i)-(viii) of this Section
13 prior to, or during the six months after, any exercise, payment or delivery
pursuant to an Award, such exercise, payment or delivery may be rescinded within
two years thereafter. In the event of any such rescission, the Participant shall
pay to the Company the amount of any gain realized or payment received as a
result of the rescinded exercise, payment or delivery, in such manner and on
such terms and conditions as may be required, and the Company shall be entitled
to set-off against the amount of any such gain any amount owed to the
Participant by the Company.
14. Adjustments.
In the event of any change in the outstanding Capital Stock of the Company by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger, or similar event, the Committee may adjust
proportionately: (a) the number of shares of Capital Stock (i) available for
issuance under the Plan, (ii) available for issuance under ISO's, (iii) for
which Awards may be granted to an individual Participant, and (iv) covered by
outstanding Awards denominated in stock or units of stock; (b) the exercise
and grant prices related to outstanding Awards; and (c) the appropriate Fair
Market Value and other price determinations for such Awards. In the event of
any other change affecting the Capital Stock or any distribution (other than
normal cash dividends) to holders of Capital Stock, such adjustments in the
number and kind of shares and the exercise, grant and conversion prices of
the affected Awards as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give proper effect
to such event. In the event of a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation, the
Committee shall be authorized to cause IBM to issue or assume stock options,
whether or not in a transaction to which Section 424(a) of the Code applies,
by means of substitution of new stock options for previously issued stock
options or an assumption of previously issued stock options. In such event,
the aggregate number of shares of Capital Stock available for issuance under
Awards under Section 3 will be increased to reflect such substitution or
assumption.
15. Miscellaneous.
(a) Any notice to the Company required by any of the provisions of the Plan
shall be addressed to the chief human resources officer of IBM in writing, and
shall become effective when it is received.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
(b) The Plan shall be unfunded and the Company shall not be required to
establish any special account or fund or to otherwise segregate or encumber
assets to ensure payment of any Award.
(c) Nothing contained in the Plan shall prevent the Company from adopting other
or additional compensation arrangements or plans, subject to shareholder
approval if such approval is required, and such arrangements or plans may be
either generally applicable or applicable only in specific cases.
(d) No Participant shall have any claim or right to be granted an Award under
the Plan and nothing contained in the Plan shall be deemed or be construed to
give any Participant the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any Participant at any time
without regard to the effect such discharge may have upon the Participant under
the Plan. Except to the extent otherwise provided in any plan or in an Award
Agreement, no Award under the Plan shall be deemed compensation for purposes of
computing benefits or contributions under any other plan of the Company.
(e) The Plan and each Award Agreement shall be governed by the laws of the State
of New York, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of the Plan to the
substantive law of another jurisdiction. Unless otherwise provided in the Award
Agreement, recipients of an Award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of New York,
County of Westchester, to resolve any and all issues that may arise out of or
relate to the Plan or any related Award Agreement.
(f) In the event that a Participant or the Company brings an action to enforce
the terms of the Plan or any Award Agreement and the Company prevails, the
Participant shall pay all costs and expenses incurred by the Company in
connection with that action, including reasonable attorneys' fees, and all
further costs and fees, including reasonable attorneys' fees, incurred by the
Company in connection with collection.
(g) The Committee and any officers to whom it may delegate authority under
Section 5 shall have full power and authority to interpret the Plan and to make
any determinations thereunder, including determinations under Section 13, and
the Committee's or such officer's determinations shall be binding and
conclusive. Determinations made by the Committee or any such officer under the
Plan need not be uniform and may be made selectively among individuals, whether
or not such individuals are similarly situated.
(h) If any provision of the Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in full force and effect.
(i) The Plan shall become effective on the date it is approved by the holders of
a majority of the shares of Capital Stock then outstanding.
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
APPENDIX C.
IBM 1997 Long-Term Performance Plan -- Federal Income Tax Consequences
The Company has been advised by counsel that, in general, under the Internal
Revenue Code, as presently in effect, a Participant will not be deemed to
recognize any income for federal income tax purposes at the time an option or
SAR is granted or a restricted stock award is made, nor will the Company be
entitled to a tax deduction at that time. However, when any part of an option or
SAR is exercised, when restrictions on restricted stock lapse, or when an
unrestricted stock award is made, the federal income tax consequences may be
summarized as follows:
1. In the case of an exercise of a stock option other than an ISO, the optionee
will generally recognize ordinary income in an amount equal to the excess of the
fair market value of the shares on the exercise date over the option price.
2. In the case of an exercise of a SAR, the Participant will generally recognize
ordinary income on the exercise date in an amount equal to any cash and the fair
market value of any unrestricted shares received.
3. In the case of an exercise of an option or SAR payable in restricted stock,
or in the case of an award of restricted stock, the immediate federal income tax
effect for the recipient will depend on the nature of the restrictions.
Generally, the fair market value of the stock will not be taxable to the
recipient as ordinary income until the year in which his or her interest in the
stock is freely transferable or is no longer subject to a substantial risk of
forfeiture. However, the recipient may elect to recognize income when the stock
is received, rather than when his or her interest in the stock is freely
transferable or is no longer subject to a substantial risk of forfeiture. If the
recipient makes this election, the amount taxed to the recipient as ordinary
income is determined as of the date of receipt of the restricted stock.
4. In the case of ISO's, there is generally no tax liability at time of
exercise. However, the excess of the fair market value of the stock on the
exercise date over the option price is included in the optionee's income for
purposes of the alternative minimum tax. If no disposition of the ISO stock is
made before the later of one year from the date of exercise and two years from
the date of grant, the optionee will realize a long-term capital gain or loss
upon a sale of the stock, equal to the difference between the option price and
the sale price. If the stock is not held for the required period, ordinary
income tax treatment will generally apply to the excess of the fair market value
of the stock on the date of exercise (or, if less, the amount of gain realized
on the disposition of the stock) over the option price, and the balance of any
gain or any loss will be treated as capital gain or loss (long-term or
short-term, depending on whether the shares have been held for more than one
year).
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
5. Upon the exercise of a stock option other than an ISO, the exercise of a
SAR, the award of stock, or the recognition of income on restricted stock,
the Company will generally be allowed an income tax deduction equal to the
ordinary income recognized by a Participant. The Company will not receive an
income tax deduction as a result of the exercise of an ISO, provided that the
ISO stock is held for the required period as described above. When a cash
payment is made pursuant to the Award, the recipient will recognize the
amount of the cash payment as ordinary income, and the Company will generally
be entitled to a deduction in the same amount.
6. The Company may not deduct compensation of more than $1,000,000 that is paid
in a taxable year to an individual who, on the last day of the taxable year, is
the Company's chief executive officer or among one of its four other highest
compensated officers for that year. The deduction limit, however, does not apply
to certain types of compensation, including qualified performance-based
compensation. The Company believes that compensation attributable to stock
options and stock appreciation rights granted under the 1997 LTPP will be
treated as qualified performance-based compensation and therefore will not be
subject to the deduction limit. The 1997 LTPP also authorizes the grant of
long-term performance incentive awards that will likewise be treated as
qualified performance-based awards.
46
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IBM NOTICE OF 1997 ANNUAL MEETING AND PROXY STATEMENT
[LOGO] Printed on Recycled Paper
<PAGE>
/ / / / / /
IBM LOGO
Dear IBM Stockholder:
YOUR VOTE IS IMPORTANT. ATTACHED IS YOUR 1997 IBM PROXY CARD. PLEASE READ
BOTH SIDES OF THE CARD, AND MARK, SIGN AND DATE IT. DETACH AND RETURN IT
PROMPTLY USING THE ENCLOSED ENVELOPE. WE URGE YOU TO VOTE YOUR SHARES.
You are invited to attend the Annual Meeting of Stockholders on Tuesday,
April 29, 1997, at 10 a.m., in Section A of the Dallas Convention Center, 650
South Griffin St., Dallas, Texas. If you plan to attend the Annual Meeting,
you should mark the box provided on the attached Proxy Card. An admission
ticket is attached for your convenience.
As part of IBM's ongoing efforts to reduce expenses, we are asking our
stockholders to permit IBM to send only one copy of stockholder publications
to their household. If you are receiving multiple copies of stockholder
reports at your address and wish to eliminate them for the account shown on
the attached Proxy Card, please mark the box provided on the card. You will
continue to receive your proxy mailings for shares held in this account.
Thank you very much for your cooperation and continued loyalty as an IBM
Stockholder.
/s/ John E. Hickey
John E. Hickey
Vice President and Secretary
<TABLE>
9926
<S> <C>
PROXY IDENTIFYING NO.
Please mark your
votes as in this
/X/ example
IBM's Directors recommend a vote FOR proposals 1, 2, 3, and 4 and
PROXY CARD AGAINST stockholder proposal 5. SHARES WILL BE SO VOTED UNLESS
OTHERWISE INDICATED.
- -------------------------------------------------------------------------------------------------
IBM's Directors recommend a vote FOR proposals 1, 2, 3 and 4
- -------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of 2. Ratification of 4. Adoption of the IBM
Directors / / / / appointment / / / / / / 1997 Long-Term / / / / / /
(see reverse) of auditors Performance Plan
(page 24) (page 29)
------------------------------------------------------
For, except vote WITHHELD IBM's Directors recommend a vote AGAINST proposal 5
from the following nominee(s): 3. Amendment of ------------------------------------------------------
Certificate of / / / / / / 5. Stockholder Proposal on
- ------------------------------ Incorporation/ executive compensation / / / / / /
stock split (page 31)
(page 25)
Will Attend Annual Meeting / /
Discontinue Mailing Publications
to this Account / /
SIGNATURE(S) DATE
--------------------------------------- ---------------
PLEASE SIGN AND DATE HERE, DETACH AND RETURN IN ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
ADMISSION TICKET THIS IS YOUR ADMISSION TICKET FOR THE ANNUAL
TO THE 1997 ANNUAL MEETING OF MEETING OF STOCKHOLDERS TO BE HELD ON
IBM STOCKHOLDERS TUESDAY, APRIL 29, 1997, AT 10 A.M. IN
SECTION A OF THE DALLAS CONVENTION CENTER,
650 SOUTH GRIFFIN ST., DALLAS, TEXAS.
STOCKHOLDERS MUST HAVE A TICKET FOR ADMISSION
TO THE MEETING. THIS TICKET IS ISSUED TO THE
STOCKHOLDER WHOSE NAME APPEARS ON IT AND
IS NON-TRANSFERABLE.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
P [IBM LOGO] INTERNATIONAL BUSINESS MACHINES PROXY SOLICITED BY THE BOARD OF DIRECTORS
R CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
O ARMONK, NEW YORK 10504 APRIL 29, 1997
X
Y Louis V. Gerstner, Jr., Lawrence R. Ricciardi, and John E. Hickey, or any of them individually and each of them
with the power of substitution, are hereby appointed Proxies of the undersigned to vote all common stock of
International Business Machines Corporation owned on the record date by the undersigned at the Annual Meeting of
C Stockholders to be held in Section A of the Dallas Convention Center, Dallas, Texas, at 10 a.m. on Tuesday, April
A 29, 1997, or any adjournment thereof, upon such business as may properly come before the meeting, including the
R items on the reverse side of this form as set forth in the Notice of 1997 Annual Meeting and Proxy Statement
D dated March 18, 1997.
ELECTION OF DIRECTORS, NOMINEES:
C. Black, H. Brown, J. Dormann, L.V. Gerstner, Jr., N.O. Keohane, C.F. Knight, L.A. Noto, J.B. Slaughter,
A. Trotman, L.C. van Wachem, C.M. Vest
(SHARES CANNOT BE VOTED UNLESS THIS PROXY CARD IS SIGNED AND RETURNED, OR OTHER SPECIFIC ARRANGEMENTS ARE MADE TO
HAVE THE SHARES REPRESENTED AT THE MEETING.)
PLEASE DETACH AND PRESENT THIS TICKET FOR ADMISSION TO THE ANNUAL MEETING
</TABLE>
